You MUST supply dying customers even if they're in administration, thunders UK.gov Just two tech firms responded to a government consultation on a potentially “catastrophic” change in the law that will force suppliers to keep kit and services flowing to biz customers that are in administration. Under proposals laid out by Business Minister Jo Swinson, providers of “essential IT” will be “prevented” from …
Though at least with IT you can throttle their bandwidth down or turn it off remotely.
When companies go into administration they just sell the assets to their mates for peanuts, the "auditor" signs it off and takes his cut until the assets are exhausted, then he moves on to the next company.
Has anyone here *ever* had more than a few quid back from a company in administration? I've never even had that. 100% loss every time.
This proposal from an organisation (the government) with a proven track record of throwing money into a bottomless IT money pit.
Not so much "Caveat emptor more caveat vendor."
All this will do is freeze out the little guy and allow the mega-corps a free run as they will be able to take the risk of supplying a very risky customer.
> Fu%k the provider, fu&k the IP, fu%k the creditors.
Real people work in the "provider" and the "creditors" too why should they be shafted?
I've been in company that have gone bust. I was lucky one of the directors put his hand in his pocket and paid the employees which is bloody rare. But I had a good idea the company was living beyond its means at the end. But mostly the employees lose a months salary unless there is pension to go up in smoke too.
I've had a customer go pop, there I've lost months of pay and I've had my reputation with their customer damaged and taken years to rebuild things. Again I was comparatively lucky, I didn't lose my business my house my family, my life, but when one firm bails it often pulls down many others. Most small businesses have higher initial costs than an IT consultancy and they fund things by mortgaging their house. If a big customer defaults on them they stand to lose everything, their bank goes for repossession. I didn't face that, I've made damn sure my business never owes any money to a bank, as I said I've been lucky.
With more business IT functions being delivered via the cloud ie. from third-parties, this is an obvious and necessary update and clarification.
We've had the recent experience of a hosting company going into administration (remember 2e2?) and the impact that had on its customer's businesses. It is a small logical step to consider the impact on a business of the loss of it's IT at a critical time and Administration is such a critical time. I expect many IP's actually lobbied for these provisions, given how many businesses are signing up to online accounting services; I mean how can you go through the books if the online accounting provider (eg. Sage, FreeAgent, etc.) blocks access to the account due to non-payment of monthly subscription?
However, I do agree with many of the arguments against these government measures, because as usual the government has laid a requirement on business with cost implications and washed its hands of any involvement by not providing any form of compensation for the likely financial shortfall.
This has more to do with the cloud than anything else. If you have PC's on-site with installed software and on-site backups then life can continue in administration (assuming power is on). If you are fully hitched up to on-line services such as Office 365, Azure, Windows 10, Photoshop, Amazon etc then your business could be dead in an instant. Ditto if you have a poor internet connection.
"The government’s plan would allow suppliers to seek a personal guarantee for debts from the IP designed to give them “certainty” that IT goods and services will be paid for"
So, as a small IT supplier, I can 'seek' a personal guarantee from the insolvency practioner so that debts will be covered?
a) what happens if I 'seek' it and they say "no"? Presumably no-one would be stupid enough to draft a law that allows that ...
b) Does this cover e.g. Big Four companies' insolvency practises as companies, not as individual IPs? Can the entire company be held liable, so that they can't do tricks like setting up a dedicated entity for handling the insolvency of a company, then putting that entity into receivership itself, without paying?
c) Does this cover any new costs arising?
d) Can any new costs arising require a prepayment or a separate PG with a charge directly on the IP business?
e) Based on personal experience, am I allowed to slap an arrogant IP across the mouth when he tells me I have to do the work to his satisfaction and then he'll decide whether or not I'll be paid for it?
I think you've pretty well identified the likely shennanigans and corporate gymnastics that will be employed.
"Hello, is the LurceLout Insolvencies? I need to liquidate my company"
Why yes it is Sir, and we can help you do just that. Please sign this contract with us.
"But that say's the IP is LucreLout Insolvencies (10) Ltd?"
Why yes sir, it does. That's just how we structure our contracts please sign the form.
"Erm, ok?"
And it's at that point that the suppliers get fecked over, as opposed to 3 months later when they find out about it, once the company has wound down and there is no more money.
LLI (10) Ltd just contracts for services to the parent company, so LLI Ltd ends up with the fee income, while the child entity that owes the IT suppliers simply dies out. I'm not saying it's fair or right, but it is very likely what will happen in practice, as the suppliers don't get a say in the insolvency contract structure.
Apart from the "goes into administration" part, I thought this was standard practise for MegaCorp. You ideally want your suppliers dependent upon your business*, then you can get better terms, or simply keep getting goods and services and not paying until you get taken to court or the supplier goes out of business.
I've seen small businesses fold because of this, I've seen MegaCorps taken to court (and lose) and then go about wrecking the small business, and I've seen a few companies turn down MegaCorp contracts for these exact reasons.
I've also been involved (as a 3rd party) where a company had bought and paid for a server, but not paid for the installed upgrades, and went bust. The IT supplier nipped in quick and pulled the upgraded parts back. Which included several disks and the RAID controller. Then a legal shitstorm follows over who owns the physical stuff, who owns the data etc. IT company did not win any favors by wiping the drives and then saying "nah, wot, us guv?" when caught on this.
*If you want a proper example of the sheer fuckery that goes on with this, supermarkets are the business to study. They often manage to get the costs of their various inputs reduced below cost, including their workforce. Seeing supermarket workers at the foodbank is a sad facet of "good business".
If they're a "sole trader" sort of practitioner, that might not be very re-assuring if you are being pressed to supply (or not remove, pehaps under the "title remains with the supplier until paid for" clause) £00,000's of kit or services.
I'm sure they will have some form of indemnity cover but that's then more hassle
The instant a firm's solvency is called into question, it is entirely reasonable for it to be expected henceforth to pay in advance for any and all goods and services it receives from outside suppliers. For that matter, we need laws to protect the employees of firms that run into difficulty: their wages should be immediately paid into escrow as they are earned.
These innocent victims, who are at arm's-length from troubled companies, who don't have the opportunity to review their books and keep an eye on their total operations, ought not to be consigned to the limbo of being "unsecured creditors" who may get nothing. Banks do have the opportunity to monitor the fiscal health of the firms to which they supply credit; of course, though, since their collateral is what is backing part of the money supply, in much the same way as gold bullion in the vaults of central banks, so I admit that a balance has to be struck.
If an invoice isn't paid due to a client going into administration, I'd switch things off regardless of the law. If the company (a legal entity) ceases to exist, nobody will be able to sue me for it. If they survive, then I lost a wobbly client who may or may not sue (unlikely, because I wasn't the reason they got into financial trouble -- they were already in administration before I switched services off).
Probably I'm missing something here, but I don't think this law will have any significant impact, especially as the 28 days payment terms are still another way out. (Most huge companies who would be more likely to sue have much longer payment terms.)
I wouldn't. If it were held that you had breached your contract with the busted company, you can be held liable for virtually unlimited costs arising from that.... I am not a lawyer, but you'll need to speak to one before gambling like that, as if the IP defrays the salary costs and supplier bills they've guaranteed onto you, your business might very well collapse too.
If this law comes to pass, please do take proper advice before doing what seems right or fair; the law isn't really concerned with either of those things, only what is legal and what is not.
The issue here is quite simple. If, as a critical IT supplier to a business that suddenly goes down the pan into Administration, I am likely to have within my terms and conditions of supply a clause which will state that in the event of Insolvency or implied insolvency, I have a right to immediately cease supply.
If an Administrator wishes me to continue delivery in order that he (the Administrator), can maximise any recovery to fill his pockets and pay secured creditors, then he will have to put his hand into his own pocket and guarantee me payment for any ongoing supply. I may still be peeved that debt owed prior to Administration may not be paid and feel angry enough to stick two fingers up at any guaranteed future payment unless I can increase the charge to account for this.
I'm all for business recovery and continuity but there comes a point where the playing field has to be level and fair.
Given that contractors work as IT services companies, I do hope this law is drafted such that we aren't gifted a situation where a contractor can't quit the client because they're in administration. Some of these things drag on for many months, and if the corporate contortionism alluded to by an AC earlier is employed, the contractor might get to the end of a 9 month "guarantee" and find the company backstopping that guarantee is also now bust.
Any lawyers or PCG members want to venture an opinion on this?
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